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- Economies of scale refers to the feature of many production processes in which the per-unit cost of producing a product falls as the scale of production rises. Increasing returns to scale refers to the feature of many production processes in which productivity per unit of labor rises as the scale of production rises.
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Jul 17, 2023 · Economies of scale refers to the feature of many production processes in which the per-unit cost of producing a product falls as the scale of production rises. Increasing returns to scale refers to the feature of many production processes in which productivity per unit of labor rises as the scale of production rises.
Economies of scale refers to the situation where, as the quantity of output goes up, the cost per unit goes down. This is the idea behind “warehouse stores” like Costco or Walmart. In everyday language: a larger factory can produce at a lower average cost than a smaller factory.
Economies of scale is related to and can easily be confused with the theoretical economic notion of returns to scale. Where economies of scale refer to a firm's costs, returns to scale describe the relationship between inputs and outputs in a long-run (all inputs variable) production function.
This article will help you to learn about the difference between returns to scale and economies of scale. Returns to scale return to the technical relationship between a portionate change in all factors (the size or scale of single plant) and the resulting change in output.
Feb 27, 2024 · Economies of scale are cost advantages reaped by companies when production becomes efficient. Companies can achieve economies of scale by increasing production and lowering costs.
- Will Kenton
- 1 min
Identify economies of scale, diseconomies of scale, and constant returns to scale. Interpret graphs of long-run average cost curves and short-run average cost curves. Analyze cost and production in the long run and short run. The long run is the period of time when all costs are variable.
In economics, the concept of returns to scale arises in the context of a firm's production function. It explains the long-run linkage of increase in output (production) relative to associated increases in the inputs ( factors of production ).
